Patent Reform Bill Signed Into Law After Years Of Debate

ALEXANDRIA, Va. -- President Barack Obama signed the long-debated patent reform bill into law on Friday, finally ending a seven-year nightmare for innovation advocates who had initially hoped to significantly overhaul the patent system.

"It really doesn't create jobs for anybody except maybe patent lawyers," says James Besson, a lecturer at Boston University School of Law and a fellow at Harvard's Berkman Center on Internet and Society.

Congress has been wrestling with the legislation for the better part of a decade, steadily eroding the bill's original purpose and instead delivering favors to a host of politically entrenched corporate players, from banks and trial lawyers to multinational drug companies.

While standing next to Eli Lilly Chief Executive John Lechleiter at a science and technology-focused high school in Alexandria on Friday, Obama again invoked the spirit of entrepreneurship and the job-creating power of innovation, saying the bill will make it easier and faster for inventors to obtain patents.

"We can't afford to drag our feet any longer, not at a time when we should be doing everything we can to create good innovative jobs," Obama said. "We should be encouraging the entrepreneurial spirit anywhere we find it."

But in many key industries today, patents have become a tremendous barrier to innovation, rather than a facilitator. And granting more patents faster may well exacerbate the problem.

When Congress initially began considering patent reform during the first term of President George W. Bush, the bill was designed to fix a broken litigation system. A series of federal court decisions had authorized the U.S. Patent and Trademark Office to begin issuing patents on software and "business methods."

While patents had historically been restricted to new gadgets, these new patents were notoriously broad in scope and vague in definition, allowing their owners to launch lucrative lawsuits against companies making generally unrelated products. Inundated with applications, the USPTO issued hordes of patents on generic or commonly-used business techniques.

Inventors who actually intended to bring new products to market could not know if their new products would violate some vague, decades-old patent held by a lawsuit specialist -- and would therefore invite a barrage of time-consuming litigation. Hundreds of companies dubbed "patent trolls" sprang up that did not produce any goods, but made their money suing for patent infringement.

In 2005, the House passed a version of patent reform that directly targeted these poor-quality patents and the legal system that was encouraging thousands of frivolous lawsuits every year, predominantly targeting computer, internet and software companies. But the bill never cleared the Senate, and as drug companies threw their weight around Capitol Hill, the substance of the legislation was steadily worn away. Limiting patent infringement damages, making it harder to sue for patent infringement, or making the patent review process more rigorous would encourage makers of generic drugs to produce versions of patented drugs and increase the costs of patenting new drugs -- both outcomes that threatened Big Pharma's profits.

In 2010, Congress dropped all attempts to reform the patent litigation system, opting instead to focus on resolving disputes over who receives a patent when two people come up with the same new invention at roughly the same time. The bill changes the U.S. from a "first-to-invent" standard to a "first-to-file" standard, which is more consistent with patent systems abroad. This eliminates the need to hold court proceedings to determine which inventor independently came up with their idea within a span of a few weeks or months, but it does not address most of the issues with the patent litigation system.

The congressional decision to pass on litigation reform has changed the way traditionally innovative companies operate. Patent trolls are no longer small operations. The nation's largest tech firms -- Apple, Oracle, Google, Microsoft and more -- now devote tremendous resources toward acquiring patent portfolios and filing lawsuits against each other. Google, which has been late to the game, is widely believed to have purchased cellphone maker Motorola Mobility in large part to enable it to defend itself from patent lawsuits and file new lawsuits of its own.